LOT Polish airlines ups its game with strategy update

LOT Polish Airlines plans to grow in size and passenger numbers and return to sustainable profits in the next five years between 2024 and 2028. Part of this will come from growing the fleet, but the carrier is about to offer a more attractive product as well. In the presence of Prime Minister Morawiecki and other ministers, LOT CEO Michal Fijol unveiled the medium-term strategy on Thursday. LOT Polish is 69.3 percent state-owned, with the remaining 30.7 owned by Polish Aviation Group (PGL) which also includes LOT Aircraft Maintenance Services, LS Technics, and LS Airport Services. Competition but especially the Covid crisis has hit LOT Polish hard and almost resulted in its insolvency in 2020. The management had to reverse plans to acquire German leisure airline Condor. With the approval from the European Commission under the temporary framework, the government supported the airline with PLN 2.9 billion (€650 million), of which PLN 1.8 billion was a subsidized loan and PLN 1.1 billion was a capital injection. The recapitalization was conditional to specific terms set out by Brussels, including that the injection would not go beyond restoring LOT’s capital position before the pandemic. No dividends were allowed for the airline and its subsidiaries, while top management was subject to remuneration restrictions until 75 percent of the loans has been repaid. The state would also have to prepare an exit strategy and reduce its share to below fifteen percent after seven years, otherwise, it will have to notify the Commission of a restructuring plan. Embraer and Airbus are both vying for an order from LOT Polish to replace the aging Embraer E1-fleet. (LOT Polish Airlines) Before the end of this year, the carrier will have to repay PLN 450 million. This has become easier on the back of good results. While it reported a PNL -10.4 billion loss in 2022 and another PNL -1.3 billion in 2021, 2022 saw LOT return to profitability and report a PLN 113.7 million net profit for the year on the back of PNL 8.3 billion in revenues. This was higher than the PNL 68.9 million profit in 2019. It carried eight million passengers, almost double that of the 4.2 million in 2021. This year, LOT is expected to report a net profit that exceeds one billion zlotys. Growing to 16.9 million passengers Under the new CEO Michal Fijol, who was appointed only in June, LOT Polish Airlines has set high ambitions for growth. The airline plans to grow back the number of passengers carried to pre-pandemic levels of ten million by carrying 10.3 million this year and growing to 16.9 million in 2028. This will come from a bigger fleet, that increases from around 75 to 110 aircraft, and the addition of twenty new medium and long-haul routes. The European network should see seventeen destinations, including new services to Athens, Basel, Belgrade, Dublin, Hamburg, Iasi, Larnaca, Lisbon, Lyon, Malta, Manchester, Nuremberg, Reykjavik, and Bologna. North America should grow with four destinations, including Montreal, Washington, Boston, and San Francisco, in addition to current flights to New York, Los Angeles, and Toronto. LOT targets new destinations in the Middle East and Central Asia, including Abu Dhabi, Amman, Riyadh, but also Tehran, and Almaty. It currently only serves Tel Aviv and Dubai in the Middle East and Tashkent, Astana, and Baku in Central Asia. The Asian network should see nine additional destinations, including Bangkok, Hanoi, Ho Chi Minh City, Singapore, and Colombo in Southeast Asia. LOT now serves Delhi and Mumbai in India. In East Asia, LOT is looking at Guangzhou, Shanghai, Busan (South Korea), and Osaka. Tokyo, Seoul, and Beijing are already on the schedule. Fleet expansion Expansion will only be possible when LOT Polish grows the fleet, which currently stands at 73 aircraft. It has a medium-haul fleet of six Boeing 737-800s and eleven MAX 8s, while the long-haul fleet consists of eight Boeing 787-8s and seven -9s. The short-haul fleet has five Embraer E170s, thirteen E175s, eight E190s, and fifteen E195s. Except for six of the 787-8s, ten E175s, and four E195s, all aircraft are leased. LOT Polish will introduce a new Business Class on the Boeing 787 fleet in 2026. (LOT Polish Airlines) It is this regional fleet that is up for replacement. Although the E190s are on average close to nine years old, the other E1s are between thirteen and nineteen years old. Both Embraer and Airbus are pushing hard for a deal, with Embraer publicly pitching an order for up to fifty E190-E2s and E195-E2s in May during its media days in Brazil. Airbus is offering the A220, hoping to get LOT Polish back into the Airbus family after the airline operated (leased) A320s, A321s, A330s, and A340s in the past. It’s no coincidence that LOT’s presentation last Thursday was attended by Embraer President and CEO of Commercial Aviation, Arjan Meijer, and Airbus sales chief for Europe Wouter van Wersch. LOT top management made no announcements about the timeline for an aircraft order and will study all options carefully, but this should not take very long to complete if the airline wants to meet the 2024-2024 targets. The new fleet will get forty percent more regional aircraft, 35 percent more medium-haul jets, and 25 percent more widebodies, the website Rynek Lotniczy reported. The only decision has been made about inducting two additional MAX 8s in the fleet next year. Dreamliner updates Part of the new strategy is an upgrade of LOT’s product. The airline will invest in a revamped lounge at its hub in Warsaw and open a business lounge in Chicago in Q3 or Q4 2024. Chicago will be the airline’s first business lounge in the US, which confirms the strategic importance of the destination with a large Polish community living in the wider area. LOT Polish and JetBlue announced an extension of their interline agreement to a wider codeshare partnership for the coming winter season, which starts by the end of October. Passengers can connect to JetBlue’s network out of New York to Boston, Washington, Orlando, Atlanta, Detroit, Las Vegas, and Los Angeles. In Poland, passengers can connect on LOT’s domestic network to Krakow and Rzeszow. The Polish airline is to open its first business lounge outside Poland at Chicago O'Hare in late 2024. (LOT Polish Airlines) Earlier last week, the airline unveiled the new cabin for the Boeing 787-fleet, which from 2026 will get a complete make-over with new Recaro seats in all three classes, Business, Premium Economy, and Economy. Business Class will have suites with privacy doors in a 1-2-1 configuration to give all passengers direct aisle access. The Safran inflight entertainment system will be upgraded to 4K resolution screens, with a 17.3 inches diameter in Business and 13.3 inches in Premium Economy and Economy Class. Viasat Wi-Fi will be introduced on the long-haul fleet.

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